Congress Dodges Free File Question, Passes IRS Reform Bill

Sign on IRS headquarter constructing in downtown Washington, DC


If at first you don’t succeed, attempt, attempt once more. And once more. After plenty of iterations, the Taxpayer First Act has lastly handed the House and the Senate.

The key provisions within the Taxpayer First Act have been reform speaking factors for properly over a yr. A proposal was launched within the Ways and Means Oversight Subcommittee in March of 2018, however finally went nowhere. Congress tried once more in 2019 with the originally-named Taxpayer First Act of 2019. The invoice was supposed to modernize the Internal Revenue Service (IRS) and strengthen taxpayer protections.

A closing model of the House invoice, H.R. 3151, Taxpayer First Act, was reintroduced by the Chairman of the Ways and Means Oversight Subcommittee, Rep. John Lewis (D-GA) and Ranking Member Mike Kelly (R-PA), on June 6, 2019. Chairman Lewis referred to as the invoice “a ray of hope.”

“It is,” he mentioned, “a significant win for the American people because it demonstrates that even in the most difficult times, we can come together as a nation, as a people and as a Congress to accomplish important things for the American people. We developed this bill the way legislation should be created. We listened to the voices of taxpayers, advocates and experts. We asked questions for many months. The Oversight Subcommittee hosted hearings and roundtables. Democratic and Republican members shared their concerns and ideas. We negotiated. We took our time, and believe that we did it right.”

The invoice handed by voice vote on June 10, 2019, and included many new provisions targeted on bettering service for taxpayers. Included are requires a brand new Internal Revenue Service (IRS) Independent Office of Appeals, seizure modifications, improved IRS customer support, and provisions for cybersecurity and identification theft safety. (You can learn extra concerning the unique provisions right here.)

Most of the provisions targeted on bettering IRS service and strengthening taxpayer rights survived to the ultimate model. There was, nevertheless, a notable exception: codification of the Free File program.

In the unique model of the invoice, the Free File program would have continued:


(a) In General.—

  1. The Secretary of the Treasury, or the Secretary’s delegate, shall proceed to function the IRS Free File Program as established by the Internal Revenue Service and printed within the Federal Register on November four, 2002 (67 Fed. Reg. 67247), together with any subsequent agreements and governing guidelines established pursuant thereto.
  2. The IRS Free File Program shall proceed to offer free commercial-type on-line particular person earnings tax preparation and digital submitting providers to the bottom 70 p.c of taxpayers by adjusted gross earnings. The variety of taxpayers eligible to obtain such providers annually shall be calculated by the Internal Revenue Service yearly based mostly on prior yr combination taxpayer adjusted gross earnings information.
  3. In addition to the providers described in paragraph (2), and in the identical method, the IRS Free File Program shall proceed to make accessible to all taxpayers (with out regard to earnings) a fundamental, on-line digital fillable kinds utility.
  4. The IRS Free File Program shall proceed to work cooperatively with the personal sector to offer the free particular person earnings tax preparation and the digital submitting providers described in paragraphs (2) and (three).
  5. The IRS Free File Program shall work cooperatively with State authorities companies to boost and develop using this system to offer wanted advantages to the taxpayer whereas decreasing the price of processing returns.

(b) Innovations.—The Secretary of the Treasury, or the Secretary’s delegate, shall work with the personal sector by means of the IRS Free File Program to establish and implement, in line with relevant regulation, modern new program options to enhance and simplify the taxpayer’s expertise with finishing and submitting particular person earnings tax returns by means of voluntary compliance.

With Free File, low-to-middle earnings taxpayers have entry to free tax prep software program. According to the IRS, as much as 100 million taxpayers, or 70% of filers, are eligible to make use of this system. (You can learn extra about Free File right here.)

IRS Commissioner Chuck Rettig has referred to as this system “an important tool that allows taxpayers free access to electronic filing of their tax returns.” He additional famous that Free File “has been a great partnership with the private sector.” However, that partnership is what raised eyebrows for some lawmakers. While 70% of taxpayers might use this system, the precise use is nearer to three%. Some of the issues had been raised after a ProPublica article alleged that the invoice would have barred the IRS from creating its personal model of this system; Sen. Kelly disputed that characterization in a subsequent op-ed.

Additional questions concerning the function of the personal sector in this system made it clear that the availability was going to be a deal-breaker. The cleanest resolution was to drag it: there isn’t any point out of Free File within the closing model of H.R. 3151 (you may learn it right here) which sailed by means of the House.

After the invoice handed, Sen. Charles Grassley (R-IA) famous that “The House passage of the bipartisan, bicameral Taxpayers First Act is the first step toward reforming the IRS and strengthening taxpayer protections. It should pass in the Senate without delay.”

An an identical model handed the Senate a couple of days later. The President is anticipated to signal the invoice.

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